The major indexes are off to a strong start this year, capping off Q1 near record highs. The Dow Jones Industrial Average on Thursday closed at a new record of 39,807, marking its 17th record close of 2024. The Dow gained 5.6% in Q1 and is up in five of the past six quarters. Entertainment giant Disney was the clear leader in the first quarter, followed by Caterpillar. Unsurprisingly, battered aerospace giant Boeing was the biggest drag on the Dow.
Disney Leads Dow Jones Rally
Disney rallied more than 35% in the first quarter, outpacing its Dow Jones cohorts by a wide margin. UBS on Wednesday hiked its price target on DIS stock to 140 from 120, according to The Fly.
Analyst John Hodulik forecasts a 25% three-year compound annual growth rate for Disney earnings, and $9 billion in free cash flow for 2024, ballooning to $14 billion by 2026. The note also said free-cash-flow growth should support dividend growth, as well as ramp up stock buybacks and incremental investments.
UBS remains bullish on Disney stock with a buy rating, Hodulik wrote.
UBS' free-cash-flow outlook is ahead of the FactSet consensus of $8.2 billion for 2024. FactSet analysts expect Disney free cash flow to increase to $10.26 billion in 2026.
The target hike comes after Disney on Feb. 7 posted a major earnings beat and provided a better-than-expected outlook. Disney reported a 23% increase in adjusted earnings to $1.22 per share, its second straight increase after four consecutive quarters of declines. However, revenue growth slowed for the third quarter in a row, inching up less than 1% to $23.55 billion and missing estimates of $23.7 billion.
DeSantis, Disney Settle Feud
Elsewhere, Disney and Florida Gov. Ron DeSantis on Wednesday reached a settlement agreement regarding the Central Florida Tourism Oversight District, which runs the special tax district in which the Walt Disney World theme park is located. The settlement ends a multiyear dispute between DeSantis and the Dow Jones company, started over Florida's 2022 Parental Rights in Education Act, dubbed the "Don't Say Gay" bill by critics, which restricted discussions in classrooms of sexual orientation and gender identity.
Former Disney CEO Bob Chapek publicly opposed the bill, prompting DeSantis and Republican lawmakers to revoke Disney's self-governing status and appoint a new board for the tax district. Back-and-forth legal battles led to Disney suing DeSantis in April 2023 in federal court, saying the governor had violated the company's free speech rights and damaged its business. The court dismissed the case in January.
Under Wednesday's settlement, the Central Florida Tourism Oversight District agreed to work with Disney to update the 2020 comprehensive plan. The settlement also included two new DeSantis appointees to the district board. Disney executives indicated they can work with the current structure, NPR reported.
The settlement opens the door for additional theme-park development in Florida. Disney plans to invest $17 billion in Florida over the next decade as part of a $30 billion spending plan to upgrade its theme parks.
Dow Jones Leaders
Construction and mining equipment manufacturer Caterpillar rallied nearly 24% in Q1 and hit a record high Thursday. Caterpillar is benefiting from a $1 trillion federal windfall supporting manufacturing, mining and infrastructure projects. The funding still has years to run.
The Dow earthmover in early February cleared Q4 earnings estimates with a 35% increase.
Credit card giant American Express posted the third-largest gain among Dow Jones stocks in the first quarter with its 21.5% advance. American Express provided a better-than-expected outlook with its late January quarterly report. The company guided from $12.65 to $13.15 per share, above FactSet forecasts of $12.38 per share.
Merck surged in late March to mark a 21% leap in Q1. The biopharmaceutical company on Wednesday received Food and Drug Administration approval for its new cardiovascular drug, Winrevair. UBS analyst Trung Huynh expects Winrevair to generate $650 million in sales this year, ahead of broader analysts' views for $462 million.
Property and casualty insurer Travelers spiked 20.8% in the first quarter to round out the top five gains in the Dow Jones Industrial average. TRV stock hit an all-time high Thursday as it continues to extend from a cup buy zone following a January breakout. Travelers in January posted a 106% earnings increase to a quarterly record $7.01 per share, ending a streak of six straight declines.
Boeing Tumbles
Boeing stock plummeted about 26% during the quarter to mark the biggest loss for the Dow. The airplane manufacturer continues to struggle with quality-control issues for its 737 Max fleet. Boeing jets were involved in numerous flight incidents during the first few months of the year, prompting the FAA to launch an investigation and increase oversight. Manufacturing issues and delays have hampered airline stocks since the first incident with an Alaska Airlines flight in early January.
Boeing on Monday announced CEO Dave Calhoun will step down at the end of the year along with a number of other executive changes.
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